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Snap Conde Nast Marketing

Snap's ad revenues get a self-serve boost but are cracks starting to show in Discover?


By Rebecca Stewart, Trends Editor

October 26, 2018 | 5 min read

Snap's investment in self-serve advertising has helped it topple revenue estimates for Q3. However, cracks may be starting to show in its Discover product for publishers, with reports Condé Nast US is to set to close a number of channels.

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In the third quarter, over 85% of Snap's ad revenue was transacted via self-service; up from 35% one year ago

The Snapchat owner posted a mixed bag of results for the third quarter of the year, noting year-on-year revenue growth of 43% to $298m. It also narrowed losses to $118m from $325m over the same time period.

During the earnings update, Snapchat forecast a company record for ad revenue in the fourth quarter, projecting it will clock in as high as $380m.

Chief executive Evan Spiegel told analysts that the "meaningful" progress was driven by its global online sales business and greater adoption of its self-serve ad platform.

In the quarter, over 85% of Snap's ad revenue was transacted via self-service; up from 35% one year ago.

"The transition to self-service has allowed us to scale our sales efforts to smaller advertisers that we couldn't initially reach," explained Spiegel.

Spiegel also said a controversial redesign of its Discover hub for publishers had allowed Snap to "invest in both the quality and quantity of content available" on its platform.

He added that Snapchat's 21 TV-style 'show' propositions on Discover were "continuing to attract more viewers and in Q3" reaching a monthly active audience of over 10 million viewers.

However, analysts raised questions about the quality of content on Discover, and the way it's presented to users.

Rich Greenfield, media analyst at BTIG Research, told Speigel: "Most of Discover seems very much kind of racy 'click baity' content focused around who can promote the most TNA to drive a click."

The Snap boss responded: "We're trying to get the right mix of content. There's a lot of demand for premium content. There still remains a lot of demand for popular stories for influencer content for what we call official accounts.

"And so right now, those different types of stories are all blended together... I think there are opportunities to improve that layout and potentially separate out that content in a way that makes sense for users."

Bloomberg has reported that one of the first publishers to launch on Discover, Condé Nast US (distinct from Condé Nast Britain), is "discontinuing its Snapchat channels for Vogue, Wired and GQ brands, and letting go of employees who were brought in to produce them."

The company which is also a Snapchat advertiser, will continue to heavily invest its Teen Vogue and Self channels, according to sources familiar with the matter. It's also understood Condé will remain an Our Story partner to Snap for tentpole events like the Met Gala and Oscars, as well as running its 'shows' on Discover.

Condé Nast US declined to comment as did Snapchat.

More ad dollars, less users

Despite upping its client portfolio and bringing in more ad dollars as a result, Snapchat's user growth fell for the second consecutive quarter to 186 million – a drop of two million.

With reverberations of an unpopular app redesign it launched at the start of 2018 still being felt, the company lost users in its most significant markets, North America and Europe.

Snap, however, said the decline was "primarily" down to Android users, who had been subject to a number of app development issues which the business has plans to iron out next quarter.

When it comes to user growth, it expects to lose more users in Q4 but has plans to appeal to broader and more global audiences outwith its strong US millennial contingent with better content.

The Android rebuild will also pivotal in helping it grow in developing countries, where it is the main operating system.

The figures follow on from Snap revealing two big hires earlier this week. It has poached Amazon's global head of ad sales Jeremi Gorman to take on the role of chief business officer and ex-Huffington post chief executive Jared Grusd who will fill the chief strategy officer position left vacant by Imran Khan.

The hires came shortly after the departure of its comms chief Mary Ritti and the exit of global head of sales Jeff Lucas and product boss Tom Conrad.

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